When does it make sense to file for foreign patent protection?
I have to address this issue with almost every client, and on a quite frequent basis. It is a difficult decision for many to make. It can result in significant cost to you or your company. Over the years, my advice regarding this issue has pretty much been the same, but I am getting better at articulating it. This post summarizes this advice. But first, let me give you the quick 411 on foreign patents.
The 411 on Foreign Patents
There is no world-wide patent. Many people ask about a world-wide patent but the bottom line – there is no such animal. What confuses people is the fact that you can file a single application under the Patent Cooperation Treaty (PCT) of which over 100 countries are members. You can see which countries are members by visiting the URL listed at the end of this article. However, this is not a patent! Filing a PCT application only gives you the right to file a patent in one or more of the member countries at the appropriate time (30 months from your earliest priority date).
Losing your foreign filing rights – public disclosure. To file a foreign patent application, you must file either a US or foreign patent application BEFORE you publicly disclose your invention. In the US, if you publicly disclose an invention you have one year to file your US patent application. This is not so for most of the rest of the world which require absolute novelty – meaning you must file before you publicly disclose or you lose your filing rights.
Losing your foreign filing rights – failure to timely file. If you file a US application before you publicly disclose your invention, then under the Berne Convention, you have one year in which to either file a PCT application or to file directly in a country in which you desire protection. Failure to do so is almost always an immediate loss of patent rights.
Losing your foreign filing rights – failure to go national. Going national is what happens 30 months from your earliest priority date when you have filed a PCT application. At this date, you need to file in the individual countries of desire or you may lose your patent rights. However, there is some grace in many countries if you miss this date – although it will cost you extra money. For instance, in the US, you can file a petition to revive based on unavoidable or unintentional abandonment. In China and Canada, you can pay a fee to extend the filing date. In the EPO you actually have 31 months from the earliest priority date. However, in some countries – such as Japan – there is no grace – you either file or lose your patent rights.
When does it make sense to file?
I generally ask clients the following questions to help make this determination:
(1) what percentage of your expected revenue is generated in each particular foreign country and what is your total expected revenue?
My rule of thumb is that if 10% of your revenue is generated in a particular country, it may make sense to file but, only if your total revenue in that country would be at least 10 times the cost of the patent. Thus, if the quote is $10K for a foreign patent, your revenue from that country should at least be $100K to simply cross the threshold point of considering to file in that country.
(2) do you have a presence in that country – such as offices, employees etc.?
If you are simply shipping product to a country from which orders come, it may be much more difficult to police the market and to enforce your patent rights. If you have bodies that are physically present in the country, and you have met the minimal requirements of question 1, you may still want to consider foreign filing.
(3) do you anticipate setting up an office in a particular country or greatly increasing your revenue from that country?
I simply ask this question to make sure that the client did not answer questions 1 and 2 by only looking at the current situation. It can take a few years for a patent to issue and the patent will be valid for a period of time and so, you should look into the future – at least 10 years – for making this determination.
(4) do you think you will actually be willing to police the market in the country and file a law suit?
This is the big question. Patent infringement law suits in the US are expensive and time consuming. Typically you are looking at well over $1M and usually quite a bit more. They require many resources, time for some of your employees, and the outcome is never certain. Now, if you take this and plop it down in a country in which there are language barriers and the fact that you are simply not on your own turf – filing a patent law suit in a foreign country can be quite daunting. Now, I am not saying that it is not wise. I am just saying that you need to make a good financial decision based on a realistic cost/benefit analysis.
(5) are your concerned with people that would sell an infringing product in that particular country or you just concerned about them making the infringing product and importing it to the US?
You need to remember that a US patent grants you exclusive rights to make, use, sell, offer to sell, import or offer to import a product that incorporates the invention IN THE US. This means that if someone makes a product in China that infringes your patent, you can do nothing. But if they try to import it into the US, you have grounds to file suit.
(6) can you police the market – is infringement discoverable?
This is an interesting question and not many consider it. Gaining a patent on an invention is one thing. However, to enforce the patent is quite another. I describe a patent as being similar to locks on your doors and windows or a fence in your yard. Good citizens will honor it. However, bad people will not. For this latter class of people, you can’t just call the police, you have to file a suit to enforce your patent. However, the main question is can you identify if someone is actually infringing your patent? In some cases it may be easy. However, if the technology is such that it is hidden, deeply embedded in a product, or is actually performed behind closed doors and never in the open (such as a process for making or doing something), even if you have a patent you may not be able to identify infringers. This by the way, is also a question I ask even with regards to filing in the US. If you can’t identify an infringer, is the patent necessary (albeit in many situations it is as a patent by itself can add value to your company as an asset?.
Conclusion
The cost for filing a foreign patent application ranges from $2000 to $10,000+. Then there are usually annual cost that are also associated with the application as well as attorney fees to get the application to issue as a patent. This is a business decision that must be looked at from several angles. Foreign protection can be an absolute necessity in some circumstances but in others, it just does not make financial sense.
Link to identify what countries are members of the PCT
http://www.uspto.gov/web/offices/pac/dapp/pctstate.html.
Gregory Scott Smith
Gregory is an intellectual property attorney and patent broker. He co-authored the Pocket Idiot Guides for Patents, Trademarks and Copyrights. Gregory has a masters in engineering with 13 years of industry experience, as well as a Juris Doctorate and 14 years of being a practicing attorney. You can learn more about him and his firm at www.lavagrouplaw.com or shoot him an email at gsmith@lavagrouplaw.com.
